News: Latest News
Latest NewsCompaniesMarketsEconomy & ForexCommoditiesInterest RatesBusiness LeadersFinance Pro.CalendarSectors 
All NewsEconomyCurrencies & ForexEconomic EventsCryptocurrenciesCybersecurityPress Releases

Chinese feed wheat demand to plummet as elevated prices curb appetite

01/25/2022 | 04:01am EDT

BEIJING/SINGAPORE, Jan 25 (Reuters) - China's use of wheat in animal rations in 2021/22 is expected to be less than half of the amount of last season, analysts and traders said, as elevated prices cut demand.

The volume of wheat used in feed could fall to between 10 and 24 million tonnes in the season that began in June, down from more than 40 million tonnes the previous year if current price trends persist, five traders and analysts estimated.

"Corn supplies would be sufficient in the new year while wheat prices would remain high, making wheat lose its advantage to substitute corn," said Lv Fengyang, analyst with the agriculture arm of Mysteel, a China-based commodity consultancy.

New government restrictions that prohibit wheat sold from state stockpiles to be used by feed producers will also slash demand for wheat as a feedstock, said a source at a major trader.

Less use of wheat, which has more protein than corn, means greater demand for both corn and soymeal, the main protein sources in animal feeds, according to the analysts.

China consumes more than 140 million tonnes of wheat a year, and imports of wheat, which soared to a record in 2021 of 9.77 million tonnes, were still just a small portion.


Chinese feed producers and livestock farmers stepped up domestic and international purchases of wheat last year to replace millions of tonnes of corn in animal feeds, after corn prices surged to a rare premium over wheat.

Following a bumper corn harvest last fall, however, Chinese corn prices weakened, restoring corn's status as the most economical feed grain.

The trend is only expected to get stronger, with some major users cutting wheat in feed completely.

"We have stopped using domestic wheat," said a manager with a feed producer in southern China.

"Can't use it anymore, as the price is too high," added the manager, whose company had up to 30-40% of wheat in feed rations around mid-2021.

Corn prices have slipped below wheat since October in key feeding hub Zhengzhou, Henan province, which is a top grower of both grains. Corn there traded around 2,780 yuan ($439.49) per tonne this week, compared with 2,860 yuan for wheat.

In 2021, corn prices in Zhengzhou and several other key feeding hubs traded as much as 500 yuan a tonne higher than wheat for several months, incentivising feed producers to make large scale substitution of wheat for corn in rations. <JCI-WHT-ZHZH><JCI-CORN-ZHZH>


"The biggest problem with (using) wheat in feed is that supplies are not stable," said a manager with a major livestock producer in northern China.

"We are running out of stocks of wheat (purchased earlier) from the state reserves, and it is hard to get wheat from the market," said the manager, whose company also stopped using wheat and had gone back to corn.

"Corn is available and price is okay," he added.

Beijing in December banned feed producers and livestock farmers from participating in auctions of wheat from state reserves.

"The government message was very clear. It won't allow too much wheat to go into the feed sector now," said an analyst familiar with policy who declined to be named due to the sensitivity of the matter. "Wheat is a food grain after all."

Wheat sales during state auctions in 2020/21 were strong, largely due to good feed demand, but cooled near the end of the crop year after Beijing's restrictions.

China released more than 40 million tonnes of wheat from state reserves in that year, with a majority of it going to feed, according to analysts.

The restrictions come as Beijing refocused its policy priority on food security amid the spreading global COVID-19 pandemic, and after strained ties with major trade partners such as Australia disrupted supplies of key agriculture commodities.

"There won't be as much wheat for substitution this year. Purchases (by feed producers) have been quite limited in general," said a manager with a major trader. ($1 = 6.3255 Chinese yuan)

(Editing by Jacqueline Wong)

© Reuters 2022
Stocks mentioned in the article
ChangeLast1st jan.
CORN FUTURES (C) - CBR (FLOOR)/C1 -4.52% 781.25 End-of-day quote.31.69%
FEEDER CATTLE?FUTURES (GF) - CMG (ELECTRONIC)/C1 -0.02% 154.575 End-of-day quote.-7.42%
LIVE CATTLE (LE) - CMG (ELECTRONIC)/C1 0.11% 132.55 End-of-day quote.-5.30%
S&P GSCI CORN INDEX -0.10% 630.9597 Real-time Quote.30.17%
WHEAT FUTURES (W) - CBR (FLOOR)/C1 12.81% 1177.5 End-of-day quote.52.77%
Latest news "Economy & Forex"
05:59pChina, Russia veto U.S. push for more U.N. sanctions on North Korea
05:59pChina, Russia veto U.S. push for more U.N. sanctions on North Korea
05:55pUtilities Shares Move Higher But Lag Broader Market -- Utilities Roundup
05:54pChevron makes offer to union in bid to end refinery strike -sources
05:52pCommunications Services Shares Rise Amid Risk-On Sentiment -- Communications Services Roundup
05:48pTechnology Shares Jump Amid Deal News -- Tech Roundup
05:47pHusband of teacher killed in Texas school dies in wake of massacre
05:41pPrevent plant scenarios creep back in with clock ticking on northern U.S. -Braun
05:41pU.S. says it is not inviting Venezuelan, Nicaraguan governments to Americas summit
05:41pFinancial Shares Move Higher -- Financials Roundup
Latest news "Economy & Forex"